Key Messages 
  • It is expected that the capacity of existing infrastructure to supply energy to consumers will be impacted by climate change especially by extreme events. There will also be significant changes in energy consumption habits.
  • Adaptation in the energy sector is diverse, and may include increasing the resilience of the energy infrastructure, increased efficiency of energy use or building adaptation capacity.
  • Economic studies of adaptation in energy supply have examined hydropower, wind, nuclear as well as the energy grid. The results of such studies are highly influenced by the energy models used, characterisation of future socio-economic drivers and supporting assumptions, including future energy price projections.
  • Much of the literature has focused on autonomous adaptation (in particular increase in the use of cooling energy). More recent literature has focused on planned adaptation.
  • A number of studies have assessed the costs of retrofitting, and broader adaptation options including spatial planning and the introduction of “green” roofs. A general finding is that it is relatively expensive to retrofit.

Context

Climate change is expected to impact the capacity for energy supply to consumers; this includes impacts on both energy transforming technologies and infrastructure responsible for transmission and distribution, e.g. as a result of storm damage. Because of the increased global temperatures expected as a result of climate change, there will be significant changes in energy consumption habits. There is also substantial concern over the vulnerability of existing energy infrastructure, including physical or “sitting” infrastructure, as well as stress on energy trade as a result of extreme events.

Adaptation in the energy sector may include investing in more robust energy infrastructure that reduces the risks presented by climate change, developing improved meteorological forecasts, changing the operations of exiting energy infrastructure, and improving their design. Options also exist to share responsibilities for losses and risks due to climate change, such as through the provision of insurance to the most affected sub-sectors. Decentralized energy centred on renewable sources is also considered a relevant adaptation option due to lower risk of power failures likely to result. A number of investments also aim to build capacity for more effective adaptation in the future. These include facilitating access to information to be used for planning the siting and operation of energy infrastructure through promoting good quality data provision, implementing effective policies via expert consultation, involving local institutions, encouraging multi-sector partnerships and integrated planning approaches.

Policy and methodological developments 

Studies on energy supply

The costs related to extreme weather events can be important: in 2005, Hurricanes Katrina and Rita caused over USD 15 billion in damages to the global energy industry (Contreras and De Cuba, 2008; GAO, 2014).

Temperature increases will have impacts on all components of the supply-side of the energy sector. Aivalioti (2015) suggests that for each degree Celsius of temperature increase, transformer capacity decreases by 1%, while the resistance of copper lines increases by 0.4%. In Europe, Sathaye et al. (2011) estimated the resulting supply-side energy expenditures to be USD 65 billion higher by 2100. Within the EU, the cost of adapting the energy grid is expected to be between EUR 636-654 million annually until 2025 (Altvater et al., 2012). More broadly, the IEA (2014) expects policies to adapt the energy supply system to climate change up to 2035 to cost USD 40 trillion annually within the OECD and China.

Climate change is expected to reduce precipitation and alter river flows, thus decreasing the potential of hydropower. Numerous regional studies have been carried out on these impacts. In Kenya, losses related to climate change in the hydropower industry will be between USD 4-19 million (Droogers, 2009). In the United States, California is estimated to lose a significant portion of its hydropower at an annual cost of USD 440-880 million (Franco and Sanstad, 2006), while Washington and Oregon will lose a combined USD 1.7 billion by 2080 (Union of concerned scientists). In Macedonia, Callaway et al. (2011) estimate the annual cost of replacing lost hydropower production at EUR 10 million.

There are several studies on the costs of adaptation for hydro-electricity, in terms of electricity system planning (using demand and energy optimisation models) as well as individual options for plants. Examples include studies in Brazil (Margulis and Dubeux, 2010), Ethiopia (World Bank, 2010) and Nepal (IDS, 2014). These indicate potentially large costs from the additional capacity needed to address demand shortfalls, though the outcomes vary significantly with climate projections. There are also some studies of the costs of adaptation in relation to the abstraction temperature of river water for cooling for thermal and nuclear power plants, an issue that emerged in the 2003 European heat wave, with estimates at European scale (Mima et al., 2011; CEPS/ZEW, 2010) and in some countries (e.g. in Germany, see Tröltzsch et al., 2012).

With regards to wind power, climate change could impact the sector positively or negatively, and this difference could be experienced regionally. While Vine (2008) predicted reduced wind speeds of 1.4 to 4.5 percent over the next 100 years due to increased cloudiness from higher CO2 levels, while de Lucena et al. (2010) expect wind speeds to increase in Brazil, making technologies more attractive to the coastal regions. Vine also estimates that this increased cloudiness will decrease daily global radiation by 0-20 percent, which could have significant impacts on solar power.

Climate change will also have impacts on the potential of nuclear power. There have been numerous instances of generating capacity being reduced due to high temperatures; in France in 2003 and in the United States in 2007, 2010 and 2011. It is estimated that power output can be reduced by at least 2% per degree Celsius of ambient air temperature increase (Aivalioti, 2015).

Studies on energy consumption

Due to increased global temperatures, climate change will cause an increased demand for summer cooling, and reduced need for winter heating. In warm emerging economies, the IPCC (2014b) reports that rising incomes will lead to growing energy demand for cooling even without climate change. Irrespective of the change in net global energy demand, it is clear that there will be strong negative distributional impacts associated with the additional adaptation costs associated with cooling. The largest increase in energy related cooling demand occurs in Asia (Isaac and van Vuuren, 2009).

There are a number of studies focusing on air conditioning and cooling costs. In the EU, Watkiss et al. (2011) estimated cooling costs at EUR 30 billion annually by 2050, with that figure trebling by 2100. Mima et al. (2011) assessed air conditioning costs for Europe, the US, China and India using a least cost-optimisation energy model (i.e. looking at the additional marginal costs of providing extra generation). Cooling costs were estimated at around €30 billion/year in EU27 by 2050, rising to €109 billion/year by 2100 (current values, undiscounted, for a A1B scenario), though these are largely offset by falling heating demand – though again a strong distributional pattern emerges, with high net cost increases in Southern Europe. The costs of air conditioning demand in India were much higher, at $480 billion/year (undiscounted) in India by 2100 (corresponding to 0.27% of projected GDP).

Where multiple studies exist for a single country these show wide ranges, reflecting a variety of assumptions relating to, e.g., socio-economic projections, treatment of capital investment. Sussman et al. (2014) report on five national studies in the US; the three most recent estimates range from $6 billion to $87 billion/year over the next few decades.  Ciscar et al. (2014) found net energy savings in Europe of 7% under a 2 degree Celsius temperature increase. The net cost of adaptation of US energy demand has been estimated between USD 1.93-12.79 billion for the 2060 time horizon (Morrison and Mendelsohn, 1999). Also in the United States. Mansur et al. (2005) predicted that electricity demand under a one-degree temperature rise would increase by USD 4 billion, and USD 9 billion under a two-degree rise. There have been studies on future energy consumption patterns outside of the context of air conditioning, including passive and retrofit options (van Ierland et al., 2006; Arup, 2008; Mima, Criqui and Watkiss, 2011) and studies considering various urban risks and cross-sectoral responses (Pohl et al., 2014; de Bruin et al., 2009).

There have also been a number of studies on the effectiveness of green roofs (van Ierland et al., 2006 in the Netherlands, LCCP 2009 in London, Tröltzsch et al. 2012 in Düsseldorf, and Nurmi et al. 2013 in Finland), which have been assessed in terms of co-benefits (e.g. reduced energy, storm-water management, sewer overflow, air quality, urban heat island, greenhouse gases), though benefit: cost ratios appear modest.

Main implications and recommendations 

Climate change will affect future energy demand, increasing summer cooling (electricity) and reducing winter heating (gas, oil, electricity). These responses are largely autonomous, and can be considered as an impact or adaptation. They are strongly influenced by socio-economic drivers (.e. population, household size, building design, efficiency) and energy/mitigation policy.

Studies are highly influenced by the energy models used, the comparison of future socio-economic drivers, and assumptions, including on future energy prices (with or without mitigation). However, none of these studies factor in the health benefits of cooling: air conditioning (AC) reduces the incidence of heat related mortality associated with heat waves (Ostro et al., 2010), which are likely to increase with climate change (a co-benefit).

What is clear is that the autonomous increase in cooling energy is potentially large, especially when they increase peak electricity demand. If this is delivered with increasing air conditioning, this will also have important dis-benefit in the form of higher greenhouse gas emissions, conflicting with mitigation objectives (unless electricity is decarbonised).

More recent literature has focused on planned adaptation. Planned responses involve major barriers to implementation (see Neufeldt et al., 2010), due to higher up-front capital costs and institutional barriers. For example, passive technologies need to be built at the design phase by one actor (the construction firm) to generate benefits for another (the household owner). This example highlights that autonomous reactive adaptation is unlikely to lead to complementary mitigation-adaptation linkages on its own, and that synergistic policy will need to overcome barriers, requiring planned public adaptation to create the enabling environment, relevant legislation or market signals.

There have also been studies at Member State and local level which have assessed the costs of passive options (e.g. van Ierland et al., 2006; Arup, 2008: ASC, 2011: Mima et al., 2011). This includes a range of options such simple shading and orientation, design and building codes, low- and very low-energy consumption buildings. They are primarily for new buildings, though there is some consideration of retrofitting existing houses. While these have the potential to be low regret, these assessments find that the net benefits vary strongly across the range of climate projections, and with the assumptions on capital costs versus operating savings. A general finding is that it is more expensive to retrofit.

There are also a  set of broader adaptation options that are associated with spatial planning, e.g. green spaces, more open plan development. These options involve much wider costs and benefits and are more difficult to assess, including potential trade-offs with mitigation (i.e. which seeks less carbon through high density cities, which increases potential heat-island effects). What is clear is that the costs of these policies may be very large, because of the opportunity costs of land-use change.

Bibliography 

Aivalioti, S. (2015), Electricity sector: adaptation to heat heaves. Columbia Law School.

Altvater, S. et al. (2012), Adaptation Measures in the EU: Policies, Costs, and Economic Assessment. Report for the European Commission.

Arup (2008), Your home in a changing climate: Retrofitting existing homes for climate change impacts, Report for the Three Regions Climate Change Group, Greater London Authority, London.

ASC (Adaptation Sub Committee) (2011), Research to identify potential low-regrets adaptation options to climate change in the residential buildings sector, a report prepared by Davis Langdon for the Adaptation Sub Committee.

Beecher, J. and Kalmbach, J. (2012), Climate Change and Energy, U.S. Global Change Research Program National Climate Assessment Midwest Technical Input Report.

Callaway et al., (2011a), The economic impacts of climate change on the hydro-electric sector: a case study of the Mavrovo hydro plant. In: Assessing the economic impact of climate change. UNDP.

CEPS and ZEW (2010), The Fiscal Implications Of Climate Change Adaptation, Centre for European Policy Studies and Centre for European Economic Research, Brussels and Mannheim.

Ciscar, JC (ed.), Feyen, L., Lavalle, C., Soria, A. and Raes, F. (2014). Climate Impacts in Europe. The JRC PESETA II Project.

Contreras, R. and De Cuba, K. (2008), The Potential impact of Climate Change on the energy sector in the Caribbean -region. An effort to understand how climate change may impact the productivity of existing and future energy production systems in the Caribbean. Department of Sustainable Development Organization of American States.  

de Bruin, K. et al. (2009). Adapting to climate change in The Netherlands: an inventory of climate adaptation options and ranking of alternatives. Climatic Change, July 2009, Volume 95, Issue 1, pp 23–45. http://dx.doi.org/10.1007/s10584-009-9576-4

de Lucena, A. F. P., Szklo, A. S., Schaeffer, R., & Dutra, R. M. (2010). The vulnerability of wind power to climate change in Brazil. Renewable Energy, 35(5), 904-912.

Droogers, P. (2009), Climate Change and Hydropower, Impact and Adaptation Costs: Case Study Kenya. Future Water Report 85, Future Water, Wageningen, Netherlands, 27 pp.

Franco, G., and A.H. Sanstad. (2006), Climate change and electricity demand in California. Berkeley, CA: California Climate Change Centre.

GAO (2014), Climate Change: Energy Infrastructure Risks and Adaptation Efforts, Report to Congressional Requesters, United States Government Accountability Office.

IDS-Nepal (Integrated Development Society Nepal), PAC (Practical Action Consulting) and GCAP (Global Climate Adaptation Partnership) (2014), Economic Impact Assessment of Climate Change in Key Sectors in Nepal, Integrated Development Society Nepal , Kathmandu.

IEA (2014). World Energy Investment Outlook. Special Report. International Energy Agency.

IPCC (2014), Climate Change 2014: Impacts, Adaptation, and Vulnerability, Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, Cambridge University Press, Cambridge and New York.

Isaac, M. and D.P. van Vuuren (2009), Modeling global residential sector energy demand for heating and air conditioning in the context of climate change, Energy Policy, Vol. 37(2), http://dx.doi.org/10.1016/j.enpol.2008.09.051.

LCCP (2009), Economic Incentive Schemes for Retrofitting London’s Existing Homes for Climate Change Impacts, London Climate Change Partnership, Published by Greater London Authority.

Mansur et al, (2005), A Discrete-Continuous Choice Model of Climate Change Impacts on Energy.

Margulis, S. and C.B.S. Dubeux (2010), Economia da Mudança do Clima no Brasil: Custos e Oportunidades, IBEP Gráfica, São Paulo.

Mima, S., P. Criqui and P. Watkiss (2011), The Impacts and Economic Costs of Climate Change on Enery in Europe: Summary of Results from the EC RTD ClimateCost Project, in Watkiss, P. (ed.), The ClimateCost Project, Vol. 1, Stockholm Environment Institute, Sweden.

Morrison, W., & Mendelsohn, R. (1998), The impacts of climate change on energy: An aggregate expenditure model for the US (No. DOE/ER/61917--T1-Pt. 1). Yale Univ., School of Forestry and Environmental Studies, New Haven, CT (United States).

Mosnier, A. et al. (2014), Global food markets, trade and the cost of climate change adaptation, Food Security, Vol. 6(1), http://dx.doi.org/10.1007/s12571-013-0319-z.

Neufeldt, H. et al., (2010), Climate policy and inter-linkages between adaptation and mitigation, Chapter 1. In. Making Climate Change Work for Us. European perspectives of adaptation and mitigation strategies (ADAM). Editors: Mike Hulme and Henry Neufeldt. Published by Cambridge University Press, 2010.

Nurmi, V. et al. (2013), Cost-Benefit Analysis Of Green Roofs In Urban Areas: Case Study In Helsinki. Finnish Meteorological Institute. Helsinki 2013, https://helda.helsinki.fi/bitstream/handle/10138/40150/2013nro2.pdf?sequence=1.

Ostro, B. et al. (2010), The Effects of Temperature and Use of Air Conditioning on Hospitalizations, American Journal of Epidemiology, 2010, Vol. 172, No. 9, http://dx.doi.org/10.1093/aje/kwq231.

Pohl, I. et al. (2014), CBA Rotterdam Climate Adaptation Strategy – Case: Bergpolder Zuid, consultancy report by REBEL to City of Rotterdam, Office for Sustainability and Climate Change. Rotterdam.

Sathaye, J., et al. (2011). Estimating risk to California Energy infrastructure from projected climate change. National Laboratory. University of California.

Sussman, F. et al. (2014), Climate change adaptation cost in the US: What do we know?, Climate Policy, Vol. 14(2), http://dx.doi.org/10.1080/14693062.2013.777604.

Tröltzsch, J., Görlach, B., Lückge, H., Peter, M., and Sartorius, C. (2012), Kosten und Nutzen von Anpassungsmaßnahmen an den Klimawandel: Analyse von 28 Anpassungsmaßnahme in Deutschland [Costs and benefits of climate adaptation measures. Analysis of 28 adaptation measures in Germany]. Climate Change, No. 10/2012, UBA, Dessau, https://www.umweltbundesamt.de/sites/default/files/medien/515/dokumente/4298.pdf.

van Ierland, E.C. et al. (2006), A qualitative assessment of climate change adaptation options and some estimates of adaptation costs. Routeplanner subprojects 3, 4 and 5, Wageningen UR.

Vine, E. (2008), Adaptation of California's Electricity Sector to Climate Change, PPIC.

Watkiss, P. (2011), The Impacts and Economic Costs of Climate change in Europe and the Costs and Benefits of Adaptation. ClimateCost Project. Final Report. Volume 1: Europe.

World Bank (2010), The Costs to Developing Countries of Adapting to Climate Change: New Methods and Estimates, The Global Report of the Economics of Adaptation to Climate Change Study, Synthesis Report, World Bank, Washington, DC.